More On Legal & Compliancefrom The Advisor's Professional Library
- Privacy Policies and Rules Whether an RIA is SEC or state-registered, the firm must have policies and procedures in effect to protect clients privacy. Policies and procedures should explicitly require an RIA to send out its privacy notice each year.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
Okay, I’ll admit it: It’s beginning to look like this social media thing isn’t going to go away (at least not any time soon). Yet it’s still not clear to me how nearly constant contact with clients—weekly, daily, 24/7—is going to fit into advisors’ practices and lives, nor how social media will actually improve service to clients or the performance of their portfolios.
To get a better handle on integrating social media into advisory practices, I recently caught up with industry veteran Jim Pierson, who is head of compliance and advisor support at Beacon Hill Financial in Columbus, Ohio. Jim is my kinda guy: he’s been working with advisors for more than 40 years, experience that’s taught him to take a no-nonsense, bottom-line approach to the business of advice. Particularly when it comes to slick new ideas that has everybody buzzing with excitement, and very little track record. Like social media.
“Everybody keeps telling me advisors need to do it,” Pierson told me. “But I’m not entirely happy with how advisors are getting into social media these days. I believe we need to take a step back, and think about exactly what we’re trying to do.” Jim suggests that advisors need to ignore the hype about social media—just as they would about any new investment product—and focus on their overall strategy for building their businesses. “What’s your strategic plan for marketing?” he asks. “How does social media fit into that?”
Pierson tells the advisors he works with to focus specifically on their long-term objectives: are they trying to bring in new clients? Increase their AUM? Build their brand as experts? Or simply strengthen their relationships with their existing clients and/or their community? “The key to successfully executing any strategic plan,” he says, “is to have objective, measurable goals.”
By “goals,” he means tangible changes to one’s business, not just techno data, such as the
The other side to social media is the costs and time involved. Most advisors already have some sense of this from their experience trying to keep their websites fresh. I can tell you from personal experience, writing a weekly blog is a whole new reality. And that’s only once a week. “Big firms like Fidelity have whole teams of people dedicated to social media,” says Pierson. “Advisors need to think about how their firms are going to handle this new workload: Who’s going to do it, and what level of resources can they dedicate to supporting it?”
And don’t forget about the compliance issues—and costs. “FINRA recently backed off [on requiring reps to] file social media communications with them,” said Pierson. “But advisors still need to capture and archive those communications, and show FINRA they’ve been reviewed.” That can be a real problem as firm compliance officers often don’t see employee communications on iPhones or from home computers. “The first thing advisors need to do,” he says, “is set up procedures about who is allowed to use social media, and how are they going to be supervised.”
Ultimately, advisors need to ask themselves whether social media is really worth it. Pierson says that for the past year or so, the sole topic of discussion at his local compliance study group has been social media. “I have not found anybody to tell me that’s it’s actually worth it,” he reports. “And more and more people are saying it’s not worth it. It’s tough to justify spending more on compliance these days. More ‘likes’ and “followers’ just don’t get down to the question of whether it’s helping advisors meet their objectives.”
In his latest blog posting, advisor Michael Kitces makes some suggestions on what social media is really good for.